Practical cost-based approach for the voltage ancillary service

The restructuring and deregulation of the electricity sector most noticeably involves the introduction of competition into energy supply. In parallel with this, however, there is an increasing desire amongst transmission system operators, generators and consumers for commercial principles to be applied to transmission services, including the provision of voltage support and reactive power control. The identification of the costs of providing such services is an important first step toward developing a transmission services market. Implementing a payment structure based on the remuneration of incurred costs can be an attractive option to commercial power sector players, who wish such costs to be recoverable at an appropriate rate of return, and system operators, who need to be assured of the availability of the necessary services. This paper addresses both the principles and practical issues involved in developing cost-based payments for reactive power, with reference to the ongoing restructuring of the Brazilian power sector.